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How To Prepare For Bankruptcy

How To Prepare For Bankruptcy

Choosing to file bankruptcy is never a simple choice for individuals and families. Once the decision has been made, the individual’s lawyer may guide them through the process, but it certainly helps to have some foreknowledge about the process. By looking at some aspects of bankruptcy, one can better prepare for situations that might otherwise have become unexpected consequences.

  1. Some Creditors May Get Around the Automatic Stay

Once you have filed for bankruptcy, the court will follow through with an automatic stay to prevent creditors from withdrawing funds from your accounts. Occasionally, a creditor can take funds from one account to pay the debt you owe on another, even after the stay has been instituted. All creditors are required to stop automatic withdrawals upon receiving notice of the bankruptcy, but there can be a delay.

  1. Be Wary of Bank Set Offs

This occurs when you have a car loan or credit card with the same bank with which you have checking and/or savings accounts. While a bankruptcy notice prohibits the bank from demanding additional payments from you, they may be able to draw funds from a checking/savings account that has a positive balance. Prior to filing bankruptcy, you may want to move your funds to another institution.

  1. Utility Companies Conduct Set Offs Too

When you signed up for utility services, the provider most likely required a security deposit from you prior to initializing service. While the utility company can no longer demand payment from you, after the notice of bankruptcy has been issued, they might apply your security deposit to what you owe. By using this kind of set off, the company might require a new (and sometimes larger) security deposit before they’ll turn on service again.

  1. Before You File, Stop Auto Payments

From gym memberships to personal loans, many businesses compel their customers to enroll in automatic payments. While this is purportedly done for the convenience of the consumer, it benefits the business more, especially when bankruptcy is filed. To ensure automatic payments don’t pose an unwelcome surprise after filing, act in advance and stop those payments before filing.

  1. Take a Realistic Look at Your Alternatives

Before filing bankruptcy, it may be beneficial to speak with creditors about a payment plan. Depending on the situation, they may be willing to work with you. If not, or if their terms are unreasonable, you can use the money you would have paid them to pay your attorney’s fee. While bankruptcy is a strong choice for many individuals, it’s important to know that the effects can be long-lasting. You may also want to consult an estate planning lawyer such as the  Scottsdale Estate Planning Attorney prior, during, or after the bankruptcy process in order to determine how this action may affect your long-term financial stability.

 

Follow Through

Many accident attorneys report that clients very often pay the fee, either in one payment or over the course of time, but never file through with filing. It’s up to the client to return the completed paperwork. If they don’t, the lawyer will likely keep the case active for a period of time, but can’t act on the bankruptcy until the client submits the required documents.

In the end, a bankruptcy, like any legal action, is dependent upon clear communication between client and attorney. If you have any more questions about filing, it never hurts to speak with an experienced professional about your own situation.

A special thanks to our authors at Arizona Estate Planning Attorneys for their expertise in Probate and Estate Law.